The Prudential Series Fund
The Prudential Series Fund
The Prudential Series Fund
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securities—in order to take advantage of new investment opportunities or return differentials. Each Portfolio’s turnover rate may be<br />
higher than that of other mutual funds due to the Subadviser’s investment strategies.<br />
In addition, certain Portfolios may be used in connection with certain living benefit programs, including, without limitation, certain<br />
“guaranteed minimum accumulation benefit” programs and certain “guaranteed minimum withdrawal benefit” programs. In order for<br />
<strong>Prudential</strong> to manage the guarantees offered in connection with these benefit programs, <strong>Prudential</strong> generally: (i) limits the number<br />
and types of variable sub-accounts in which contract holders may allocate their account values and (ii) requires contract holders to<br />
participate in certain specialized asset transfer programs. <strong>The</strong> use of these asset transfers may, however, result in large-scale asset<br />
flows into and out of the relevant Portfolios. This is particularly true for th Target Maturity Portfolios and the AST Investment Grade<br />
Bond Portfolio. Such asset transfers could adversely affect a Portfolio’s investment performance by requiring the relevant Subadviser<br />
to purchase and sell securities at inopportune times and by otherwise limiting the ability of the relevant Subadviser to fully implement<br />
the Portfolio’s investment strategies. In addition, these asset transfers may result in relatively small asset bases and relatively high<br />
transaction costs and operating expense ratios for a Portfolio compared to other similar funds.<br />
Prepayment or call risk. Prepayment or call risk is the risk that issuers will prepay fixed-rate obligations held by a Portfolio when<br />
interest rates fall, forcing the Portfolio to reinvest in obligations with lower interest rates than the original obligations. Mortgagerelated<br />
securities and asset-backed securities are particularly subject to prepayment risk.<br />
Real estate risk. Certain Portfolios may invest in REITs and real estate-linked derivative instruments. Such on emphasis on these types<br />
of investments will subject a Portfolio to risks similar to those associated with direct ownership of real estate, including losses from<br />
casualty or condemnation, and changes in local and general economic conditions, supply and demand, interest rates, zoning laws,<br />
regulatory limitations on rents, property taxes, and operating expenses. An investment in a real estate-linked derivative instrument<br />
that is linked to the value of a REIT is subject to additional risks, such as poor performance by the manager of the REIT, adverse<br />
changes to the tax laws, or failure by the REIT to qualify for tax-free pass-through of income under the Internal Revenue Code of<br />
1986. In addition, some REITs have limited diversification because they invest in a limited number of properties, a narrow geographic<br />
area, or a single type of property.<br />
Selection risk. <strong>The</strong> risk that the securities, derivatives, and other instruments selected by a Portfolio’s Subadviser will underperform<br />
the market, the relevant indices or other funds with similar investment objectives and investment strategies, or that securities sold<br />
short will experience positive price performance.<br />
Short sale risk. A Portfolio that enters into short sales, which involves selling a security it does not own in anticipation that the<br />
security’s price will decline, exposes the Portfolio to the risk that it will be required to buy the security sold short (also known as<br />
“covering” the short position) at a time when the security has appreciated in value, thus resulting in a loss to the Portfolio.<br />
<strong>The</strong>oretically, the amount of these losses can be unlimited, although for fixed-income securities an interest rate of 0% forms an<br />
effective limit on how high a securities’ price would be expected to rise. Although certain Portfolios may try to reduce risk by holding<br />
both long and short positions at the same time, it is possible that a Portfolio’s securities held long will decline in value at the same<br />
time that the value of the Portfolio’s securities sold short increases, thereby increasing the potential for loss.<br />
Small company risk. <strong>The</strong> shares of small companies tend to trade less frequently than those of larger, more established companies,<br />
which can have an adverse effect on the pricing of these securities and on a Portfolio’s ability to sell these securities. Such<br />
investments may be more volatile than investments in larger companies, as smaller companies generally experience higher growth<br />
and failure rates. <strong>The</strong> securities of smaller companies may be less liquid than others, which may make it difficult to sell a security at a<br />
time or price desired. Changes in the demand for these securities generally have a disproportionate effect on their market price,<br />
tending to make prices rise more in response to buying demand and fall more in response to selling pressure. In the case of small cap<br />
technology companies, the risks associated with technology company stocks, which tend to be more volatile than other sectors, are<br />
magnified.<br />
U.S. government and agency securities risk. In addition to market risk, interest rate risk and credit risk, such securities may limit a<br />
Portfolio’s potential for capital appreciation. Not all U.S. Government securities are insured or guaranteed by the U.S. Government,<br />
some are only insured or guaranteed by the issuing agency, which must rely on its own resources to repay the debt. Mortgage-backed<br />
securities issued by government sponsored enterprises such as Freddie Mac or Fannie Mae are not backed by the full faith and credit<br />
of the United States.<br />
Other debt obligations issued or guaranteed by the U.S. government and government-related entities risk. Securities issued by<br />
agencies of the U.S. Government or instrumentalities of the U.S. Government, including those which are guaranteed by Federal<br />
agencies or instrumentalities, may or may not be backed by the full faith and credit of the United States. Obligations of the GNMA,<br />
the Farmers Home Administration, the Export-Import Bank, and the Small Business Administration are backed by the full faith and<br />
credit of the United States. Obligations of the FNMA, the FHLMC, the Federal Home Loan Bank, the Tennessee Valley Authority and<br />
the United States Postal Service are not backed by the full faith and credit of the U.S. Government. In the case of securities not<br />
backed by the full faith and credit of the United States, a Portfolio generally must look principally to the agency issuing or<br />
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